Do you know about - Refinanced Your Home - Claim a Tax Deduction For Points
Mortgage Interest Deduction! Again, for I know. Ready to share new things that are useful. You and your friends.The mortgage refinance store has cooled off dramatically with modern rate increases. Many people, however, refinanced during 2005 and can claim tax deductions.
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Mortgage rates have been shockingly low over the last few years. This is hardly news to anything that owns a home. The nominal rates, however, did ensue in a major boom for the mortgage industry. As rates jostled up and down, millions refinanced to save just the fraction more on their home loans. Heck, many population refinanced multiple times! Alas, this rapid refinance craze has come to an end with the rise in mortgage interest rates.
If you refinanced this past year to get lower rates, I have some good news. Not only did you get lower rates, but you probably built up some additional tax deductions you can use to cut your tax bill.
To collect a mortgage, either new or a refinance, homeowners often have to pay points. These nasty limited charges characterize a percentage of the loan and are typically an upfront charge. Fortunately, points are deductible. Generally, you will claim a deduction for points as part of the mortgage interest deduction that makes our real estate industry so attractive. The type of loan, however, impacts how the points are deducted.
If you obtained a new home loan for a residence, you can deduct the full number of the points. To do so, however, you must itemize on your tax return. Since you should be deducting the interest paid on the mortgage as well, this is a no brainer.
If you refinanced an existing home loan for a residence, however, things are a bit different. Yes, you can deduct the points paid on the refinance. Unfortunately, you have to deduct them over the life of the loan. In practical terms, you cannot deduct the full ,000 you paid in points when you refinanced in August of last year. Instead, you can deduct a percentage of the ,000. The percentage is the value of the points divided by the number of months of the loan. There are two ways around this tax handicap.
If you refinanced twice in 2005, and some of you did, you can deduct the full number of the points on the first refinance. Why? You can do this because the life of the first refinance was less than a year, which all occurred in 2005.
In distinct cases, points may also be immediately deductible if you used a refinance for home improvements. It is a bit technical and beyond the scope of this article. If you of course used a refinance to improve the home, and you can prove it with receipts, speak with a tax professional to write off all your points immediately.
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